Daily Currency Update
UK construction PMI missed forecast data showed yesterday, with a UK house building slump weighing on construction output. This is a third consecutive month of declines, led by another sharp fall in residential buildings. Bank of England’s Bailey offered sound bites of note during his press conference about the financial stability report Wednesday morning. He stated that the full impact of higher interest rates is yet to hit the UK. Despite this, he reiterated that rates need to remain around current levels as inflation remains uncertain. This contrasts with other central banks globally that have started to consider rate cuts in 2024 – notably the US and Europe. Labor data from the US showed firms have slowed their hiring with manufacturing cutting jobs. The news is a prelim to other labor data from the US this week, with the key release coming on Friday in the form of the unemployment rate and non-farm employment change. GBP/USD is a little softer, falling to 1.2545 during the Asian session overnight but has made a break for 1.2600 twice since Europe opened. GBP/EUR has remained firm in the mid-1.1600s. EUR/USD trades under 1.0800.
Key Movers
The Japanese Yen rallied overnight against a basket of major currencies after the Bank of Japan governor Kazou Ueda said policy management would become even more challenging from 2023 end to 2024. This was in response to the sustainability of the bank's negative interest rate policy. Market participants have now started betting that they will need to raise interest rates as early as January 2024. This makes the Japanese Yen an investable currency, with a safe haven status. Sterling has fallen 1% against the Japanese Yen and currently testing 182.50. The USD has seen a similar dive, testing a fall below 145.00.
Expected Ranges
- GBP/USD: 1.2540 - 1.2660 ▲
- GBP/EUR: 1.1640 - 1.1690 ▲
- GBP/AUD: 1.9080 - 1.9260 ▲
- EUR/USD: 1.0750 - 1.0830 ▲